As markets tighten and market competition increases, it becomes increasingly difficult for companies to achieve product differentiation in their market place. As such, businesses will find it harder and harder to optimise their profits unless they develop effective strategies to achieve differentiation. One way to accomplish this is through the enhancement of customer intimacy.
Account Planning, Management & Development is the process that organisations adopt in order to prioritise their customers in terms of value to the business. In most businesses, the 80/20 rule applies where 80% of current and/or potential revenue comes from 20% of the customer base. However, in recognising the value that these 20% of customers hold, it is important to adopt a strategy that is going to ensure that they are handled in such a way that maximum effort is focused on the activities that will yield the greatest potential for the company in a profitable fashion.
Successful Account Planning, Management & Development ensures that a company recognises the importance of certain customer relationships to the future of their organisation and treats these relationships as an asset to the company.
The process used to categorise customers in terms of potential as well as the process adopted to manage and develop these customers effectively are paramount to the success of any Account Planning, Management and Development strategy.
So what is a Key Account?
Essentially, it is a customer who can help to shape your company’s future. This may not necessarily be your largest customer nor the highest spending customer. In this way, the top 20 revenue, one-size-fits-all approach can be costly and risky.
Once you have completed your customer research, a number of factors should be assessed when deliberating your Account Planning, Management and Development strategy:
- Current revenue profitability vs. potential revenue profitability
- Complexity of needs
- The industry in which they operate and its viability
- Financial stability
Although the process of developing and managing Key Accounts more intimately yields greater customer penetration or share of wallet, the costs of maintaining an intimate relationship with clients can also be costly. It is for this reason that the ‘biggest’ clients do not always make the ‘best’ clients. It is a common mistake for organisations to simply segment their customer base into key accounts based on their revenue contribution, consider:
- Larger companies often require more attention and expect not to pay for it
- Larger companies tend to exert their power and negotiate lower prices, often exploiting suppliers by creating price wars (thus reducing profitability)
- Larger companies employ the resources of smaller suppliers, only giving them small orders but getting the lowest prices so they can squeeze on their larger suppliers (again, affecting profitability)
It is often a hard lesson for salespeople to learn that many big companies rarely provide the return on investment proportionate to the amount of effort that’s required. In addition, these customers often compromise the company’s profitability significantly.
Analyse your accounts
So you need to analyse your accounts carefully. When analysing an account, your core focus is to interpret the customer data in such a way that will provide you with an understanding of how you can yield maximum potential from the client.
There are five key areas that need to be researched:
This is the big picture information it explains why they are in business and where they are headed as an organisation. This information is critical to your basic understanding of the company.
The nuts and bolts of the organisation, the what, the when and the where.
This information is critical in assessing the ongoing viability of the customer.
Recognise their strengths and minimise them. Recognise their weaknesses and exploit them. Understand what they are doing and know how to combat their activity.
Your Company History
Have a basic understanding of previous dealings with the customer but also know where to find more detailed records if or when required.
I hope this helps you plan and use your selling energy wisely.